“NGC”) is responsible for assessing and periodically reviewing the adequacy of these guidelines and recommending proposed changes to the Board, as appropriate. The Corporate Governance Guidelines are posted on our website at www.keyenergy.com. We will provide these guidelines in print, free of charge, to stockholders who request them.
As stated above, because the Company currently qualifies as a “Controlled Company” under the NYSE Rule 303A we are permitted, and have elected, to opt out of the NYSE rules that would otherwise require our Board to be comprised of a majority of independent directors and require our compensation committee and NGC to be comprised entirely of independent directors. However, all members of our audit committee meet the independence requirements set forth in the rules of the NYSE and SEC and all members of our subcommittee of the compensation committee meet the independence requirements set forth in the rules of the NYSE and SEC. Under applicable rules of the NYSE, a director will only qualify as “independent” if our Board affirmatively determines that he or she has no direct or indirect material relationship with Key.
The Board has determined that, except for Mr. Drummond, who serves as our President and Chief Executive Officer (“CEO”), and Messrs. Norment, Kotzubei and Kelln and Ms. Sigler, each of our current directors is independent within the meaning of the foregoing rules, including Messrs. Edmiston, Vogel, Gaut, Pruett and Wommack. The Board also considered Mr. Gaut’s position as a former executive officer of Forum, one of our equipment suppliers, and determined that the relationship between Forum and Key does not affect Mr. Gaut’s independence. For additional information regarding the relationships of Mr. Gaut, see the discussion below under the heading “Certain Relationships and Related Party Transactions.”
Board Leadership Structure
Our Board consists of Mr. Norment, the Chairman, and nine other directors. Our Corporate Governance Guidelines provide that non-employee directors will meet in executive session on a regular basis without management present. The Chairman presides at all meetings of the Board, as well as executive sessions of non-employee directors and, in consultation with the CEO, non-employee directors and management, establishes the agenda for each Board meeting. In the event that the non-management directors include directors who are not independent under the listing requirements of the NYSE, as is currently the case, our Corporate Governance Guidelines provide that at least once a year, there shall be an executive session including only independent directors and the director who presides at these meetings (the “Lead Director”) shall be chosen by the Board based on the recommendation of the NGC. The Board has appointed Mr. Gaut as Lead Director. The Board has also delegated certain matters to its certain committees. Mr. Drummond, as the Company’s President, CEO and Director, works in concert with the rest of our Board to oversee the execution of the Company’s strategy.
Director Nomination Process
Pursuant to the Plan and our certificate of incorporation and bylaws, during the Initial Board Term, directors were appointed by Soter and the Other Parties, as described in “Board of Directors” above.
Following the Initial Board Term, for as long as our Series A Preferred Stock is outstanding, the Board will consist of nine members, five of whom will be nominated and elected by Soter as the holder of our Series A Preferred Stock and four of whom will be nominated by the Board and elected by holders of our common stock. Upon the cancellation of the Series A Preferred Stock, the holder of the Series A Preferred Stock will no longer have the right to nominate any directors. At the first annual meeting following the cancellation of the Series A Preferred Stock, the then-current Board will nominate their successors, and the stockholders of the Company will elect the directors.
The NGC is responsible for identifying individuals who are qualified to become Board members following the Initial Board Term, provided that Soter, and not the NGC, will identify any individuals whom Soter will nominate and elect to the Board. Nominees for directorship are selected by the NGC in accordance with the policies and principles of its charter. Although there is no formal diversity policy, our Board believes that the backgrounds and qualifications of its directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow it to fulfill its responsibilities. Pursuant to its charter, the NGC is tasked with recommending director candidates who will assist in achieving this mix of Board members having diverse professional backgrounds and a broad spectrum of knowledge, experience and capability. At least once a year, the NGC will review the size and structure of the Board and its committees, including recommendations on Board committee structure and responsibilities.
In accordance with NYSE requirements, the NGC also oversees an annual performance evaluation process for the Board, the audit committee, the compensation committee and the NGC. In this process, anonymous responses from directors on a number of topics, including matters related to experience of Board and committee members, are discussed in executive sessions at Board